Debt: Zombie Debt Collectors: Years ago, most people who defaulted on debts rested easy after several years passed, because not many creditors would try to re-collect, especially on small debts.

But today, collecting old debts is becoming a booming industry. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar, then use credit scoring and other new technologies to identify which debtors are likely to repay.

Last year over $75 billion in old debts were sold.

A growing number of companies are discovering that old accounts, once thought to be uncollectible, are just the opposite. Recovering a small payment from debtors can make collection activities worthwhile.

Are you being approached by an unknown debt collection agency?

Some are finding profits, while others are noting abuses, leading to widespread violations of the federal Fair Credit Reporting Act and the Fair Debt Collection Practices Act.

Among the worst practices:

Suing or threatening to sue over debts even though the statute of limitations has long expired.

Illegally 're-aging' debts on credit reports. The collectors tell credit bureaus that an old debt is a new one. They do this to extend the seven-year limit on reporting negative items and to put more re-payment pressure on the consumer.

Promising to delete a negative mark from the consumer's credit report in exchange for a payment. Not only does the collector fail to follow through, but the payment can revive the statute of limitations and lead to a lawsuit. Even if the collector does back off, the unpaid debt could be sold to another company that might renew collection activity.

Bait-and-switch credit cards. Some credit card companies have offered borrowers low-rate credit cards and then tacked old, charged-off debts; often purchased from other lenders, onto the balance. The card issuers typically insist they disclosed that the old debts would come with the cards.

Verbally abusing and harassing consumers. My readers have reported being cursed, berated and called repeatedly despite requests to stop, which are all violations of federal laws.

Even worse, paying an old debt can potentially damage (or further harm) a consumer's credit score. Such a payment can update a delinquency so that it looks more recent and takes a heavier toll on a credit score.

Paying the debt is also no guarantee that the nightmare will stop. The collector may decide that if you?re willing to pay at all, you could be made to pay more or all of the debt. Settling a debt for a smaller amount than the collectors says you owe could result in another agency trying to collect the unpaid portion. Or the collector might inform the Internal Revenue Service (IRS) that you've received 'income' in the form of forgiven debt.

Even if you get the collector to promise in writing that none of the above will happen, you would have to be willing to go to court if the agency reneged; and possibly face an unsympathetic judge or one who doesn't know much about collections law.


If you're being contacted about an old debt:

Know the statute of limitations. If you racked up a debt in another state, check the statute of limitations there as well. But generally it's the statute of your current state that applies. If the statute has expired, the collection agencies' legal remedies are limited.

Know your rights. Credit and debt collections can be an extremely complicated area of the law. If the amounts at stake are considerable or the level of harassment unbearable; consider an attorney.

Consider ignoring the call, particularly if the statute of limitations have expired. There's little to gain and a lot to lose if you keep talking. You could inadvertently extend the statute of limitations or find yourself roped into a repayment agreement that might not be in your best interest.

If ignoring them isn't working, consider writing a letter demanding the agency stop contacting you. Send it certified mail, return receipt requested. Federal law requires them to comply with your request. Make sure in the letter you specifically say that you aren't acknowledging you owe the debt.

If the statute of limitations hasn't expired, you may want to negotiate a settlement rather than risk a lawsuit. (Again, a lawyer's advice may be helpful.)

Keep an eye on your credit report. If a collection agency tries to repost an old debt or lie about the date it went delinquent, you'll need to fight back vigorously. Dispute the entry with the credit bureaus and with the collection agency.

If the collector persists in its deception, you can demand that the collector produce a copy of the documentation that created the debt, such as the credit card agreement you originally signed, along with an account history. Chances are the collector won't have this documentation, and continuing to report the account without providing proof that you owe the money is a violation of the Fair Debt Collection Practices Act.

An attorney; experienced in debt collection law, may prove helpful in particularly difficult cases.